Financial & Non-Financial Motives for Starting a Business PDF

Financial motives for setting up a business Profit maximisation An entrepreneur may aim to make the highest amount of profit possible This is the difference between revenue and costs, so they will seek to minimise costs and maximise revenue The advantages to a sole trader are larg...

Financial motives for setting up a business Profit maximisation An entrepreneur may aim to make the highest amount of profit possible This is the difference between revenue and costs, so they will seek to minimise costs and maximise revenue The advantages to a sole trader are larger wages can be drawn from the profit The advantages for a Ltd company and a PLC is dividends will be larger on shares, this may attract more investors Profit satisficing An entrepreneur may aim to make just enough profit to keep the business moving plus another aim at the same time For example a business may want to make a profit and: Reward employees with higher wages Invest in environmental project Serve the community in some way Non-financial motives for setting up a business Non-financial motives introduction Sometimes an entrepreneur will start a business for reasons other than profit. There are lots of reasons, but these are the 5 that you exam board would like you to know. Get ready to make some notes about these from the next few slides: 1. Independence 2. Flexibility 3. Ethical reasons 4. Social purpose 5. Personal challenge #1 Independence For many entrepreneurs the idea that they can work for themselves and no longer have to commute to work for someone else is all the motivation that they need to set up their own business Every week Dragons’ Den shows many entrepreneurs keen to launch a product or get a business off the ground to work for themselves #2 Flexibility Many entrepreneurs seek to start their own business to gain flexibility in their life It can be hard to balance the needs of a family with the requirements of work This work life balance can be better achieved if the entrepreneur can work from home or for themselves Kirsty Henshaw was a single mum with a great idea HERE #3 Ethical reasons Some businesses may decide to trade in a more ethical way For example: Environmental trading at their heart Animal rights Fair wages for workers in African nations e.g. Divine Chocolate Organic and anti-GM crops Ethics #4 Social purpose Social enterprises are businesses trading for social and environmental purposes e.g. mecocouk Many commercial businesses would consider themselves to have social objectives, but social enterprises are distinctive because their social and/or environmental purpose is absolutely central to what they do In a social enterprise the profits are reinvested to sustain and further their mission for positive change #5 Personal challenge Some entrepreneurs may find working for another business as boring and unchallenging. They may decide to set up their own business instead This should give them the daily challenge and excitement that they seek Deano Some entrepreneurs set up Jackson more than one business as of HUUB they wish to keep challenging wetsuits themselves Watch the video HERE